NOL

NOL: 4Q14 net loss narrowed 38% to US$85.1m, bringing full year net loss to US$259.8 (FY13 net loss: US$76.3m), sorely missing estimates.

In the quarter, top line dropped 5% to US$2.23b, due to a 6.8% decline in liner revenue to US$1.79b, from both lower freight rates (-1.7%) and volume (-8%). This was slightly offset by a 5.5% growth in logistics revenue to US$458m.

Gross margins improved 3pp to 8.4%, largely driven by operational efficiencies in the liner business.
Liner utilization rate was 93%.

Gearing increased to 225% from 182% a year earlier, increasing risks that the group might have to raise equity.
Management expects that overcapacity in the liner industry will persist in 2015, while highlighting that increased port congestion in the US West Coast, from a worsening in the labor situation, remains a potential risk.

Broadly, NOL is expected benefit from lower bunker prices in 2015. Nevertheless, management is uncertain on how lower bunker prices could affect freight rates in the longer term.

No updates were given regarding the potential sale of APL Logistics, though it had clarified in Aug ’14 that there was no certainty the deal would be completed. Some opine talks could have fallen through, especially so because the deal had been exploratory in nature.

NOL is trading at 1.1x P/B.

Latest broker ratings:
Deutsche Bank maintains Sell with TP of $0.91
OCBC downgrades to Sell from Hold with TP increased to $0.92 from $0.84
Goldman Sachs maintains Neutral with TP of $1.00
JP Morgan maintains Neutral with TP increased to $1.00 from $0.90
CIMB maintains Hold with TP increased to $1.06 from $0.88
Credit Suisse maintains Neutral with TP increased to $1.10 from $0.95
Barclays maintains Overweight with TP of $1.15